Steen

The California Council of Civil Engineers and Land Surveyors (“Cal Council”), an association of California employers engaged in civil engineering and surveying, established a trust fund (“Cal Council Trust”), through which it purchased insurance from John Hancock Mutual Life Insurance Co. (“John Hancock”) to provide health insurance benefits to the employees of its member employers. As part of the insurance agreement, Cal Council and John Hancock established a Rate Stabilization Reserve (“RSR”), administered by Association Administrators & Consultants (“AA & C”), under which an amount equaling twelve percent of the annual premium paid by the Cal Council Trust to John Hancock was to be set aside to offset potential premium increases caused by unforeseen increases in claims paid on the John Hancock policy. Under the agreement, the RSR balance was to be returned to the Cal Council if it withdrew from the insurance agreement after sufficient notice. When John Hancock terminated the agreement, a dispute over the amount due from the RSR to the Cal Council arose.

The Civil Engineers and Land Surveyors of California (“CELSOC”) was created as a result of a merger between the Cal…